Finance Dictionary ( daily finance terms and concepts will be added and discussed)

Exchange
There are three main U.S. stock exchanges on which securities are traded.* AMEX is the American Stock Exchange.* NASDAQ is the National Association of Security Dealers.* NYSE is the New York Stock Exchange.









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Federal funds rate


This is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans.* The Fed Funds rate, as it is called, often points to the direction of U.S. interest rates.





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Futures contract

This is an agreement that allows an investor to buy or sell a commodity, like gold or wheat, or a financial instrument, like a currency, at some time in the future.* A future is part of a class of securities called derivatives, so named because such securities derive their value from the worth of an underlying investment.





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Initial public offering


An IPO is stock in a company that is being traded on an exchange for the first time.* Investors first read a prospectus that describes the potential of the company and the risks of investing in it.



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Insiders


These are directors and senior officers of a corporation -- in effect those who have access to inside information about a company.* An insider also is someone who owns more than 10 percent of the voting shares of a company.



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Junk bond
A bond with a speculative credit rating of BB or lower is a junk bond.* Such bonds offer investors higher yields than bonds of financially sound companies.* Two agencies, Standard & Poors and Moody's Investor Services, provide the rating systems for companies' credit.





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LEAP

A LEAP is a long-term option contract for a company's stock.* They usually run for one year or more and are available on several U.S. exchanges.





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Limit order
Investors can place an order to buy or sell securities at a set price.* The trade can take place only at that price or a lower one.
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Margin


This allows investors to buy securities by borrowing money from a broker.* The margin is the difference between the market value of a stock and the loan a broker makes.






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Market Cap
This is the company's market capitalization.* If a company has 10 million shares and the company shares are selling for $10, the market cap is $100 million.
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Market Cap
This is the company's market capitalization.* If a company has 10 million shares and the company shares are selling for $10, the market cap is $100 million.
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Money market


Money markets are for borrowing and lending money for three years or less.* The securities in a money market can be U.S. government bonds, Treasury Bills and commercial paper from banks and companies.





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Moving average


A moving average is an average of a security's price over a specific time period.* The average changes, for example, on a 30-day moving average, so that it includes the most current 30 trading days.* Moving averages often indicate levels of support or resistance for a security.
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Municipal bond


State or local government offer muni bonds, as they are called, to pay for special projects such as highways or sewers.* The interest that investors receive is exempt from some income taxes.



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